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The International Finance Corporation (IFC), the World Bank Group's private sector investment arm, seeks to further
economic growth by promoting sustainable private sector development in developing member countries, thereby reducing
poverty and improving people's lives. IFC is a legally and financially independent institution and is collectively owned by its
174 member countries. Since its establishment in 1956, IFC has committed more than $29 billion of its own funds and has
arranged $19.2 billion in syndications and underwriting for 2,446 companies in 136 developing countries. By working closely
with business and entreprenuers — both large and small — IFC adds value to the development process by acting as an
adviser to clients and governments and by creating standards of behavior in corporate environmental and social
responsibility for its own investments — and for the private sector generally. IFC strives to be more transparent and © 2000 The International Finance Corporation (IFC)
accountable and seeks input from a broad set ot stakeholders, especially project affected communities. 2121 Pennsylvania Ave, NW Washington, DC, 20433 USA
IFC has in-house environmental and social project appraisal capacity and also provides advice and training to financial All rights reserved
institutions on these standards. IFC's environmental, social and disclosure policies, procedures and guidelines have been
This Guide has been prepared by the staff of the International Finance Corporation (IFC). The judgments
developed after extensive peer review and draw on best practice and experience across a wide range of industries and expressed do not necessarily reflect the views of IFC’s Board of Directors or the governments they represent.
disciplines. Using both its own funds and concessional funding from sources such as the GEF, IFC also invests actively
in projects with specific environmental goals, supporting projects ranging from renewable energy to clean water supply. ISBN 0-8213-4891-4
For more information on IFC and its activities in promoting sustainable private sector investment, go to: www.ifc.org/enviro.
Environment
Division
Promoting Environmentally
and Socially Responsible
Private Sector Investment
TABLE OF CONTENTS
Foreword iii
Acknowledgements v
Introduction ix
• The Purpose of the Resource Guide ix
• The Resource Guide’s Audience ix
• How to Use This Resource Guide ix
• Defining Corporate Community Development Programs x
Chapter 1
The Business Case for Community Development 1
• Earning a ‘Local License’ to Operate through Improved Community Relations 3
• Creating Strategic Advantage through Community Development Programs 4
• Community Development Programs Help Fulfill Business Objectives 5
• Conclusions: Toward Strategic Community Development Programs 6
Chapter 2
Defining Community 7
• Information Sources and Techniques 9
• Identifying and Prioritizing Stakeholders 9
• Social Impact Assessment 10
• Balancing Local, Regional, National and International Interests 11
• Including Vulnerable Groups 12
Chapter 3
Defining Community Development Program Areas 13
• Use Available Information 14
• Use Participatory Methods 14
• Start Small, Build Trust 15
• Sequence Community Development Programs with the Project Cycle 16
• Conclusions 16
Chapter 4
Linking Core Business Activities with Community Development 17
• Maximizing Local Employment 18
• Local Subcontracting 20
• Maximizing Benefits from Infrastructure Development 22
• Benefiting from Employee Involvement 22
• Integrating Community Development Concerns into Business
Decision-Making Processes 23
Chapter 5
Partnerships for Local Development 25
• Four Qualities to Look for in Partner Organizations 27
• Key Principles for Good Partnerships 28
• Forming Partnerships with NGOs and CBOs 28
• Partnering with Other Businesses 29
• Working with Other Donors 29
• Partnering with National and Local Governments 30
• Building Government Capacity 31
• Balancing Local, Regional and National Interests 32
• Coordinating with Government and Other Stakeholders 33
• Conclusions 33
Chapter 6
Options for Program Structure 35
• Choosing between a Company-Managed or Independent Program 36
• Some Considerations for Company-Managed Programs 36
• Some Considerations for NGO or Foundation-Managed Programs 37
• International Standards for Foundations, Trusts or Non-Profit Organizations 37
• Boards of Directors 37
• Staffing 38
• Funding Mechanisms 39
• Financial Disclosure 39
• Raising Outside Funding and Support 40
• Monitoring and Evaluation 40
• Conclusions 41
Chapter 7
Participation and Sustainability 43
• Incorporating Stakeholders: Building Participation into Program Structure 44
• Building Sustainability into Project and Program Structure 45
• Conclusions 46
Case Studies
Case Studies: Lessons in Community Development from IFC Clients 47
Introduction 49
Annexes
Abbreviations and Resources 71
• Abbreviations 72
• Resources 73
FOREWORD
Development is about people. And, I believe strongly that investing in people to help
them achieve their hopes and goals — to improve their lives — is what development is
all about. As business learns to be more responsible corporate citizens and neighbors,
companies, communities and civil society organizations will increasingly be working
together to find solutions to even greater development challenges in developing countries.
The International Finance Corporation (IFC) is starting to map its road to
sustainability. A central pillar of this process will be how IFC and our clients
engage with stakeholders, especially the communities where we work. I strongly
believe that private sector investment and sustainable growth in the developing
world is fundamental to achieving greater equity in the development process.
At the dawn of this new century, the development challenges we all face, as global
citizens, remain daunting. Stark inequalities still exist at all levels — north and
south; local and global. We live in a world where 1.2 billion people earn less than
$1 a day; 2 billion people lack access to electricity; and 3 billion people lack
access to clean drinking water. These numbers underscore the truth that poverty is
a vicious and complex cycle. But, we should not forget that there are faces behind
the numbers and finding innovative and lasting solutions to these challenges
should be a never-ending priority.
It is crucial that the private sector, as an increasingly significant catalyst for
positive change, continues to step up to face these challenges thereby
demonstrating responsibility and accountability in the development process. Rapid Peter L. Woicke
communications in the "global village" mean that companies' environmental and
social performance is under ever-greater scrutiny from an ever-widening stakeholder
audience. As a result, our understanding of the boundaries of private sector corporate
responsibility is evolving at a rapid pace. In turn, this acts as a driver for new and innovative
models of assurance, accountability, and partnership. The cynic may view this simply as a
response to criticism from pressure groups, but I believe that sound business performance
will increasingly be synonymous with environmental and social sustainability. Indeed, a
company's bottom line may very well be at stake if its 'local license to operate' is put at
risk. Additionally, business and industry increasingly recognise that engagement with
communities goes beyond consultation and dialogue — they may also have to concretely
demonstrate that communities will derive development benefits from their operations.
Many clients and other businesses have told us that they feel guidance in this area and the
opportunity to learn from others would be most valuable.
In response, IFC has prepared this Community Development Resource Guide as a tool
primarily for companies, but also we hope of value to NGOs and community groups,
governments, consultants, policy-makers, development practitioners and communities
themselves. It follows the 1998 release of the public consultation Good Practice Manual
from which we have received much positive feedback (for which we are grateful) and
which we believe provides complementary guidance in this difficult area. We hope that the
Guide will help prioritize development needs; allow others to learn from and build on the
successes — and failures — in community development; and to suggest innovative
solutions to bridging the divide between business and communities.
The Guide draws generally on concrete examples of corporations and projects where
complex environmental and social impacts have been dealt with innovatively and
successfully. But, a number of these examples also underscore the reality that nobody has
all the answers; that it is an evolutionary and evolving process where we all continue to
learn. To illustrate this, the Guide includes three in-depth cases of IFC clients who have not
only woven community development into their corporate ethos — but they have championed
FOREWORD III
the idea that community development is not just an "add-on" to doing business. However,
each company has taken a different approach to achieve their community development
goals. One company, TISCO, an iron and steel company in India, has spun-off a company-
sponsored NGO specifically aimed at implementing community development activities.
Escondida, a copper mine in Chile, has created two foundations to address community
development needs in surrounding communities and beyond. Finally, Phinma in the
Philippines, believes that the only way to make community development sustainable, is to
tie it to their core business through specialized management functions.
I believe firmly that the private sector, acting responsibly, can be an enormous force for
good in helping to achieve our dream of a world free of poverty and I hope this Guide can
make a small contribution to that shared goal. There is much to be done and I welcome
you in joining us on our journey to sustainability.
Peter L. Woicke
Executive Vice President
International Finance Corporation
December, 2000
IV FOREWORD
ACKNOWLEDGEMENTS
The Community Development Resource Guide was created with the input and
collaboration of a large number of people. Amit Nigam was the Guide’s principal research
author. Shawn Miller and John Butler were the Guide’s Project Managers. Harry
Pastuszek edited this draft. The Guide benefited greatly from the input of IFC staff
including Dan Aronson, Kerry Connor, Nick Flanders, Debra Sequeira, Eric Brusberg
and Dana Lane. Carol Lee, Meg Taylor, Andreas Raczynski, Mark Constantine, Glen
Armstrong, Maria Gallegos and Martyn Riddle all reviewed the Guide and offered their
input and support. Special thanks goes to Peter Woicke for his vision and willingness to
take risks in expanding IFC’s role in sustainable development.
The Guide also benefited from the input of others within the World Bank Group. Special
thanks to Joyce Malombe in the Social Development Family who collaborated throughout
the process. It also received helpful input from Rita Hilton in the Partnerships Group,
Coralie Gevers and Nigel Twose in Business Partners for Development, Kathryn McPhail,
Aidan Davy and Lee Irish from the Social Development Family and Ramanie Kunanayagam
and Gary McMahon from the World Bank Mining Department.
The IFC case studies were researched and prepared by Renee Dankerlin. She was assisted in
this effort by: Messrs. Jose Miguel Ojeda and Jorge Zeballos of Fundacaion Minera Escondida
and Minera Escondida Limitada respectively; Mrs. Shaksi Sharma and Mr. R.K. Singh of Tata
Iron and Steel Company (TISCO); and, Mr. Roger Salazar, Mr. Antonio de la Rosa, Mr. Pyth
Brion and Dr. Magdaleno Albarracin of the PHINMA Group. IFC would like to thank these
individuals for their time, expertise and willingness to contribute to the case studies.
Many people shared experiences and lessons learned from their companies’ community
development programs or company-initiated NGOs, including (in no particular order)
Hugh Rix, Palabora Foundation; Richard O’Brian, Richards Bay Minerals; Carlos Alberto
Roxo, Aracruz Celulose; Enrique Andrade, Cerro Matoso; Manuel Bonifaz, Endessa/
Botrosa; Rosauro Luntayao, Central Azucarera Don Pedro; Rene Lawenko, Philippine
Investment Management Corporation; Beatrice Lopez, formerly from Fundacion Inti Raymi;
Javier Diez de Medina; Inti Raymi Foundation, Arthur Hood, Misima Mines Limited; Sixto
Mendez, ARCO petroleum; Jean-Pierre Reveret and Dan Lambert, QIT Madagascar
Minerals; Dan Lipson, Fundacion Wong; John Senior and Glynn Cochrane, Rio Tinto;
and Sharon Belanger, Niel Watlington and Debbie Bruin at AES Corporation.
A number of people in NGOs and research institutions also offered A note on sources: A variety of
comments, suggested companies and shared their experiences with secondary sources were also used
companies engaged in community development issues. Gina Velasco, to draft this document. Secondary
Philippine Business for Social Progress, commented throughout the research sources are cited in the resource
process and put the author in touch with a number of Filipino companies directory. Examples that come
with excellent community development programs. Harriet Fletcher and Jane primarily from secondary sources
Nelson, Prince of Wales Business Leaders Forum, also offered a great deal of (sometimes supplemented by
help. Maria Clara Bertini, Fundacion Esquel, helped put the author in touch phone conversations or personal
with a number of company programs in Ecuador. In addition, the Guide communication) also cite the
benefited from the suggestions, information and contacts provided by appropriate source.
Stephanie Hanford, World Business Council for Sustainable Development;
Carlos Diez Canseco, Sociedad Nacional de Mineria Petroleo y Energia in Peru; David
Logan, Corporate Citizenship Company; Shirley Buzzard, Corcom; Myra Alperson, the
Center for the Study of Philanthropy; James Cooney, Placer Dome; Michele Chan-Fishel of
Friends of the Earth-US; David Clayton, Industrial Cooperation and Development advisor;
Mokheti Moshoeshoe, South African Grantmakers’ Association; Chris Krueger, Linda Borst,
Carlo Dade and Walter Price, Inter-American Foundation; Assheton Carter, University of
Bath; Mike Luz, Asian Institute of Management; Ed Sevilla, Unocal Philippines; and Rob
Wasserstrom, the Terra Group.
ACKNOWLEDGEMENTS V
Finally, special thanks go to the people who offered detailed comments in the process of
peer review, including Gina Velasco, PBSP; Stephen Davis, Western Mining Corporation;
Laurie Regelbrugge, Civicus; Rob Wasserstrom, the Terra Group; Janet Ranganathan, World
Resources Institute; John Senior former director of Community Relations at Rio Tinto; Chris
Chamberlain, formerly of the Bank Information Center (BIC); Des Connor of Connor
Development Associates; Alan Dabbs, ProNatura; Myra Alperson, the CUNY Center for the
Study of Philanthropy; Michele Kahane, The Ford Foundation; and Delwin Roy; President
Emeritus of the Hitatchi Foundation.
Design, artwork and formatting prepared by Wood Communications.
VI ACKNOWLEDGEMENTS
KEY PRINCIPLES FOR COMMUNITY
DEVELOPMENT PROGRAMS
1. Engage in effective community consultation
Culturally appropriate and effective community consultation is key to proper
community development. Consultation through all phases of a company’s operations
forms a basis of trust and helps companies identify community needs, define the
community development responsibilities of stakeholders and manage expectations
among community members. Companies should consult IFC’s public consultation
Good Practice Manual for practical “how to” advice on effective consultation.
2. Build trust
Building trust between the company, community members and other stakeholders is
essential to a successful program. Trust may be difficult to establish and hard to
maintain. Culturally appropriate consultation and participation, along with good faith
and transparency, are essential to building and maintaining trust between all stakeholders.
INTRODUCTION IX
DEFINING CORPORATE COMMUNITY DEVELOPMENT PROGRAMS
Community development programs are programs to promote sustainable economic growth,
environmental protection, education, skills building and the health and welfare of people
who live near or are affected by a company’s operations. They can be managed by a
company department specifically designed for the purpose or even by an NGO, or
through a foundation. They might also be managed within a company’s purchasing,
marketing, human resources or distribution departments. Some of the most innovative
community development efforts arise from cross-functional partnerships between groups
within a corporation.
Playing an active community development role involves making commitments that go
beyond those of most businesses. This includes:
• getting a strong commitment from the CEO and senior management to take on
a positive community development role
• hiring staff with solid experience in community development
• building awareness of community development issues and needs with employees
and managers
• hiring local staff with knowledge of community issues
• mobilizing core competencies of the business, including products, political and
business contacts, employee skills, training, financial management, human resources,
and other resources in support of community development, and
• assuming responsibility and accountability for the community development programs
and strategies adopted and identifying incentives/operational practices that promote
and encourage community development.
Building a good community relations and development program
also involves effective public consultation. Companies should
review the IFC publication Doing Better Business Through
Effective Public Consultation and Disclosure: A Good Practice
Manual. The Manual offers practical “how to” guidance to
companies on developing consultation strategies and conducting
culturally appropriate consultation on project-specific
environmental and social assessments.
Many companies recognize the benefits of doing good
community development work and choose to take on these
commitments. In the process, communities benefit from
companies that are better equipped and eager to assume a
role as partners in community development.
X INTRODUCTION
CHAPTER 1
The Business Case for
Community Development
A few years after calling for a moratorium on all petroleum development activities in the
Pastaza province of Ecuador, an indigenous people’s organization (OPIP) and other groups
began working with ARCO to move its oil projects forward. This was, in part, due to
ARCO’s ongoing efforts to support leadership among community groups, contribute to local
institutions and engage stakeholders in a dialogue about environmentally and socially
responsible oil exploration and community development in their concession areas. Though
faced constantly with challenges and difficulties, ARCO was able to build positive working
relations with various community groups in their area of operations. A key focus of concern
for these indigenous peoples groups was a community development plan that would be
carried out in the exploration and development phases of the operations.
Source: Mendez, Parnell and Wasserstrom
Some companies engage in community development work because they are committed
to social responsibility and community development. However, businesses should also
recognize that community development makes good business sense. This chapter highlights
the business case for doing effective and sustainable community development work.
Three reasons why companies might engage in community development work are:
• to earn a ‘local license’ to operate
• to create strategic advantage through community development work, and
• to address specific business issues.
Not all companies choose to develop their own capacity to do community development
work. Often, companies prefer an ad hoc or philanthropic approach to achieving
community development goals, such as:
• participating in business forums that focus on community involvement activities
• giving money to local community development foundations or scholarships for local
educational programs
• organizing employee volunteer programs with local organizations that carry out
community development work, and
• forming partnerships with NGOs or other organizations that play a role in managing
community development activities.
Others may go beyond the ad hoc approach and develop proactively their internal
community development capacity, either by setting up a community development
department, by sponsoring an NGO or by actively promoting community development
objectives within existing business units.
REFERENCE 1.2
Company skills and resources that may contribute to effective community
development include:
• the ability to generate incomes, jobs and wealth for local communities
• managerial skills
• planning skills
• financial skills
• market analysis capabilities
• marketing and communication skills
• product donation
• donation of premises or office equipment
• human resources development, and
• training.
REFERENCE 1.3
A strong community relations program involving ongoing community consultation, dialogue
and a community development program helped Shell Prospecting and Development in Peru
identify and address a potentially significant community issue. Shell had been using
hovercraft to transport supplies along rivers. Local indigenous communities objected to the
hovercrafts because they were noisy, physically frightening and were believed to carry
demons. Through a culturally sensitive public consultation program, the company was able
to address these concerns by:
• making changes in hovercraft design to reduce noise
• adding red boats to precede the hovercraft in order to forewarn community members
• instituting stops so community members could inspect for demons, and
• stopping hovercraft usage on Sundays, a day with a large volume of competing
river traffic.
This consultation program helped the company identify the issue early and avoid potential
delays and breakdowns in community relations.
Source: May
REFERENCE 1.4
In 1991, Levi-Strauss & Co. became the first multinational corporation to establish comprehensive
Global Sourcing & Operating Guidelines. These guidelines govern sourcing for the company’s
apparel business. Among the components of these standards is a pledge to ‘favor business
partners who share our commitment to contribute to improving community conditions.’
Source: Levi-Strauss web page
REFERENCE 1.5
Companies use community development programs to fight HIV/AIDS
In Thailand, the Grand Hyatt Erawan and the Pan Pacific, both large Bangkok-based hotels,
have been leaders in the business effort to fight HIV/AIDS. Both companies have extensive
worker education and training programs and free condom distribution for staff members.
Both are active members in the Thai Business Coalition on HIV/AIDS and involved in AIDS
prevention and treatment programs in the broader community. The two hotels also
participate in a UNICEF project that offers training in hotel and life skills to young women
from northeastern Thailand, the highest risk region for forced prostitution.
REFERENCE 1.6
A community development program helps with socially responsible resettlement
When Tata Steel was planning a new steel plant at Gopalpur in Western India, it first turned
to the Tata Steel Rural Development Society (TSRDS), the company’s community
development program. The company wanted to establish good communications links with
community members to prepare for the resettlement that would accompany the new plant.
They relied on TSRDS staff, who had experience with community consultation and relations,
to commence work in the area, and over the next four months built up a full-fledged
communication resettlement and rehabilitation team. Source: Tata Steel
REFERENCE 1.7
Including communities in company mission statements
“AES wants to treat fairly its people, its customers, its suppliers, its stockholders, governments
and the communities in which it operates.”
– AES Corporation, Principles and Practices
“Our Responsibilities …. To respect the common interest
• To participate in the life of the communities where we operate
• To operate responsibly toward the environment
• To be guided by the principles of integrity, openness and respect in our commitments”
– Lafarge Group, Group Ambitions and Values
“The company should have among its objectives the promotion and growth of the
national economy through increased productivity, effective utilization of material and
manpower resources and continued application of modern scientific and managerial
techniques in keeping with the nation’s aspirations and the company shall be mindful
of its social and moral responsibilities to the consumers, employees, shareholders, society
and local community.”
– Tata Steel (India), Articles of Association, Article 3A
REFERENCE 2.1
• A company operating in an unpopulated region in Namibia during the period of South
African rule chose to define the whole country as its ‘community.’ Choosing the whole
country also enabled the company to fulfill its objectives of demonstrating that it has
not only benefitted its neighbors but the Namibian people in general. The success of its
program helped the company maintain good relations with the post-independence
Namibian government.
• A mining company in South Africa targeted the communities within a 50-km radius of
its operations. The programs enabled the company to work with people in the
immediate vicinity of its operations and in a broader region. This helped it implement
complementary community development programs in a large section of the province.
• A wood product manufacturer in Ecuador focused on indigenous communities with
which it also forged timber-purchasing agreements. This allowed the company to fulfill
its goal of sourcing supplies of timber from sustainably managed forests.
Companies can attempt to define community by creating a social map to help choose the
focus of their community development programs. IFC’s public consultation Good Practice
Manual may help companies conduct a stakeholder identification program. This map can
help companies target their community development programs at:
• people who have been directly affected by a project
• people who expect to benefit from a project
• people who live near a project, and
• vulnerable groups or people who are in particular need.
Companies can create a social map by answering a few key questions:
• Who is directly or indirectly affected by our business and how?
• What different groups exist in the communities around us and what are the conflicts of
interest and power relations between these groups?
• Who is particularly vulnerable or marginalized within the community?
• Who lives near or is affected by the project site?
• Who are our other stakeholders? This may include relevant NGOs, community-based
organizations and local government, shareholders, customers, and suppliers.
• What is an ideal balance between communities in our immediate surroundings and
those in the broader region?
DEFINING COMMUNITY
DEVELOPMENT PROGRAM AREAS
START SMALL, BUILD TRUST Key elements of a participatory planning process include:
• Participatory methods should be used to involve
Building community trust and confidence in a communities from the very start of the planning process.
community development program is essential Methods can include interviews, consultation programs
to creating participatory and sustainable and community meetings.
projects. CADP’s community organizing • Community consultation must be carried out in a
approach (see Reference 3.1) started with culturally appropriate manner. This may include separate
small, manageable projects that helped build consultations and meetings with women, people from
the capacity of community organizations and different age groups, poorer families or individuals,
develop a relationship of trust between the indigenous peoples and other marginalized groups. Build
company and communities from the outset. on the work done when defining target communities.
• Community consultations should also include
Reference 3.2 organizations, federations or individuals that are chosen
by community members as their representatives.
The Oracabessa Foundation used
• Companies should present plans to community members
consultation, partnerships and a process
of successfully implementing small and groups in advance of finalization to get community
projects to build trust between the validation and suggestions for changes and improvements.
foundation, company and community. • Consultation and community-based planning should be
The Islands Communication Group of done, if possible, in the primary language of community
Companies started the foundation in members. Otherwise, it should be conducted in a
Oracabessa, Jamaica in 1995. The Islands
Group plans to develop a major tourism
language widely spoken and understood by community
resort in the region in the near future. The members and leaders.
Foundation is a tool to assist the company • Community consultation should be facilitated, if necessary,
in its goal to build a tourism project that by training in budgeting, planning, management or other
promotes sustainable development and necessary skills. Take advantage of any government training
real improvement in the lives of programs that may not currently be offered locally.
Oracabessa residents. The Foundation
started modestly, forming a partnership • Companies should also coordinate with other stakeholders,
with the local primary school to develop such as the local and national government or local NGOs
an organic garden, build a music program and CBOs.
and improve facilities. It also formed a • Consultations must be free from coercion and intimidation.
partnership with the secondary school to • Companies should try, when defining program areas, to
include computer education in the
curriculum. In both cases, it built
build the communities’ capacities to plan and carry out
relationships with parents by working community development programs. Building community
with the Parent-Teachers Association. capacity makes programs more sustainable.
The Foundation has since created the
Oracabessa Mediation Center to promote
alternative dispute resolution and to train community groups and the police in conflict
resolution. It also sponsors a bi-monthly discussion forum called the Oracabessa
Labrish in which community members discuss community development, environmental
management and other issues of importance to the community. All of these helped the
Foundation to build trust and rapport with community members.
Source: Partnerships for Poverty Reduction Website
British Petroleum refocused its program in Casanare once its oil fields went into production
due to the large royalty payments going to local governments. Community development
efforts were altered to focus on methods to ensure royalties were used to effectively further
the area’s development.
Source: Davy and McPhail, Casanare Case
Kelian Equatorial Mining Company, a Rio Tinto company in Indonesia, is planning for mine
closure. The company, in partnership with the Rio Tinto Foundation, started to develop
alternative livelihood activities for community members, such as commercial agriculture, in
the areas near the mine.
CONCLUSIONS
Properly defining program areas lays a solid foundation for a successful community
development program. By consulting with the community to determine priority areas
from the outset, a program establishes an atmosphere of trust and confidence that will
be vital to overall success. Finally, companies must ensure that program areas retain
relevance to their business objectives or risk jeopardizing their internal commitment
to community development.
ACTIVITIES WITH
LINKING CORE BUSINESS
COMMUNITY DEVELOPMENT
As part of its agreement with the Nana Regional Corporation, an Alaskan Native
corporation in Northwest Alaska, the mining company COMINCO was responsible for
maximizing employment of NANA shareholders in its Red Dog zinc mine. In response,
a NANA-Cominco joint management committee was set up to oversee the mine and
an employment committee was established to manage
the effort to hire, train and promote NANA
shareholders. Cominco expanded its on-site training Key tasks to link community
programs, instituted skills sharing programs among development with core
employees, created an Engineering Scholarship
Program for NANA shareholders and a School-to-Work business activities
partnership which involves a job shadow program with • Include community development
the Northwest Arctic Borough School District. The
company also offers apprenticeship programs, tuition considerations in corporate
aid programs and a semester on/ semester off job share
education schedule to help employees increase their strategic planning
skills to equip them for mine employment. • Train and hire local employees
Source: NANA/ Cominco Ltd
• Subcontract locally; train
The largest impacts that companies have on their local suppliers
neighboring communities and regions are the impacts
of their business operations themselves. Companies’ • Tailor infrastructure to suit
operations generate local employment, build community needs
infrastructure and pay taxes. New or modernizing
• Involve employees from the outset
business operations often raise local expectations for
employment and economic activity. However, managing
these expectations is a key challenge for company leaders.
Linking community development with core business activities can cost little and be highly
effective. Hiring locally, making minor adjustments in plans or infrastructure to suit
community needs and developing local suppliers of goods and services increases positive
impacts at minimal cost to the business.
Systematically linking community development with core business operations,
however, involves integrating concern for development impact into decision-making
processes throughout business operations. Many companies have made efforts to
maximize local employment and purchases and to leverage the core competencies of
their businesses to promote community development.
Reference 4.2
In anticipation of a future need for skilled construction workers, AES Corporation worked
with teachers at a local technical school to offer a free voluntary training program in
construction skills in the community near a prospective power plant. Though the
community had a 40 percent unemployment rate, local industry had difficulty recruiting
skilled labor. The program trained 200 people from the community and facilitated the
accreditation of the technical school.
In an effort to employ more women at its plant in Pune, India, Cummins Engine Company
worked with the Cummins Foundation, the Rose Hulman Institute and other businesses in
Pune to found the Cummins Engineering College for Women at a local women’s university.
The college now has 1,000 students and serves as a training ground for women engineers
for Cummins and other companies.
Source: Edwards
Misima Mines Limited, a gold mining company in Papua New Guinea, created training
programs both for mine employment and for employment in the outside workforce. In order
to maximize local employment, they established an apprenticeship program equivalent to
technical college certification in mechanical, secretarial and construction trades. They
offered scholarships to university and for training in nursing, occupational health and safety,
mill operation, and community health. In addition, the mine’s training officer conducts
basic secretarial courses in the local high school and computer training for employees. The
company also provides broader training to the community in bookkeeping, legal rights,
village administration and community organization, all of which provide skills useful in
managing local development.
LOCAL SUBCONTRACTING
In addition to local employment, a company can have a positive socio-economic impact in
a project area by sourcing products and services locally through subcontracts with local
companies. Subcontracting locally draws on existing resources in an area and expands
opportunities for local businesses. It is important, however, for companies to identify ways
they can promote local subcontracting while also working to avoid potential dependency
of subcontractors on company purchases.
Preferences for local businesses as subcontractors are a good first step. These preferences
should, however, be linked with mentoring or skills development to help local businesses
win contracts with other companies in the locality, region, country or world.
Several companies have started micro-enterprise development programs as part of a
community development program. These are often linked to specific business needs, and
for this reason the risk of micro-enterprises becoming dependent on the company must
be addressed. Companies use this strategy to encourage community members to start
companies that may provide catering services, cleaning services, construction services
or the production of a variety of products for both the company and other local
businesses. Companies can also offer market research support to help small businesses
aim their products at a broader regional market. With skills development and market
research, companies can transform programs to promote local subcontracting into more
sustainable programs designed to build the capacity and promote the competitiveness
of local businesses.
Reference 4.4
Richards Bay Minerals in South Africa started an innovative micro-enterprise development
program involving training for entrepreneurs and small businesses as well as broader
support for entrepreneurship and micro-enterprise in South Africa. The company has
joined with the Department of Education in an effort to make entrepreneurship training an
accredited subject in the national school curricula. Richards Bay, through its Business
Advice Centers, offers:
• training resources for small businesses
• programs to promote purchasing from small businesses
• a strategy to encourage other local businesses to purchase locally
• programs to link entrepreneurs with larger ‘partner’ businesses, creating a Local
Business Service Center in partnership with the Department of Trade and Industry, and
• a container bank to grant small easily accessible loans to vendors and hawkers.
Reference 4.5
When negotiating access rights for a gas pipeline on Vancouver Island with the Cowichan
Band in 1989, Centra gas, a subsidiary of Vancouver-based Westcoast Energy, agreed to
help equip the Band to install the gas mains and connections. The company helped find
a partner that could offer technical assistance, expertise and financial backing to the
Band. As a result, Khowutzan Pipeline Constructors (KPC) was formed in January 1991
as a joint venture between the Cowichan Band and Northern Pipelines, a U.S.-based
construction company. KPC brought in skilled instructors to train employees of the
new company in safety, fusing, the operation of underground locating systems, boring
equipment and pipe pushers. KPC won its first contract with Centra Gas in the spring
of 1991 and was awarded a second contract for service in the Saanich Peninsula. The
company currently has revenues of about $10 million a year and has won further
contracts with Centra and other companies.
Source: Sloan and Hill
Reference 4.6
Hindustan Lever, part of the Unilever Group of India, established an Integrated Rural
Development Program to improve milk supplies to its diary factory in the Etah district
in India. The factory had been operating at 50% capacity and incurring significant losses
because of inadequate milk supplies. In 1976, the company started a program to work
with farmers to build dairy supplies through an integrated rural development approach.
The company started animal husbandry projects in addition to literacy projects, health
care programs, basic infrastructure projects and a concerted effort to build village
development committees. As a result, basic living conditions indicators in the area
have improved, the project area expanded from 6 to over 400 villages and milk supplies
increased, making the dairy one of the company’s most profitable units. The program
benefits from the participation of managers from throughout the Unilever Group because
the company uses the program as a training ground for young managers. Managers spend
a period of time living in communities in the Etah district and working with community
organizations. The program enables communities to benefit from the skills of the company’s
employees and helps the managers develop leadership skills and a better understanding of
the company’s rural market.
Source: PWBLF, Business as Partners in Development
Alternatively, in some cases the best policy might be to avoid infrastructure development
and to build a project that minimizes external impacts to the area. This could be the case
in circumstances where the secondary impacts from infrastructure development may be
potentially damaging to local communities, especially when vulnerable groups are
involved, such as indigenous peoples.
Reference 4.8
Shell Prospecting and Development Peru (SPDP), in its Camisea Project, made the
decision to avoid building roads to the project and to bring in all personnel and
equipment by helicopter or river transport. This approach was adopted to minimize the
negative indirect impacts of population influx. Shell’s policy helped limit harm to
indigenous peoples living in the area who were opposed to the possible immigration of
agricultural settlers and job seekers.
Source: May
Reference 4.9
The Philippine Investment Management Consultants (PHINMA), the largest cement
producer in the Philippines, regularly involves its technical staff and management in its
community development activities. Participation of senior management in the company’s
community development programs helps set an example for other employees and build a
‘culture of community service’ within the company. Employees participate by offering
support to community development programs, including help with engineering, finance and
The Tata Group of Companies in India, through the Tata Council for Community Initiatives,
has set up the Tata Corps of Volunteers to promote employee involvement in community
development. The council makes an effort to facilitate employee involvement in community
development by publicizing community development activities and encouraging managers
to volunteer as an example for other employees. They have also made lists of volunteers
available to various community organizations and have recognized and rewarded the
volunteer efforts of employees.
Source: http://www.tata.com/community/tcciprog.htm
PARTNERSHIPS FOR
LOCAL DEVELOPMENT
Reference 5.1
The Palabora Foundation, linked with the Palabora Mining Company in South Africa,
worked closely with the Northern Transvaal Department of Education, NGOs, parents and
community groups to improve educational services in the state. It started eight preschools in
the communities around the mine with the agreement that the Department of Education
would provide teachers and the schools would be run by steering committees that include
staff of the Foundation, officials from the Department of Education and members of parent
and other community groups. It has since started running an advisory service to help other
communities set up preschools in collaboration with the government. It worked with
schools in the state to implement training programs to improve the quality of Math and
Science education and worked with public schools to help them set up library services for
students. By working in partnership with others the Foundation was able to take advantage
of additional resources to promote lasting improvements in education throughout the state.
The Inti Raymi Foundation in Bolivia worked with schools in the city of Oruro to offer
services as complements to the standard educational curriculum. The Center for Multiple
Educational and Inter-Cultural Services aims to improve public education in Oruro by
training teachers, helping schools include indigenous people’s studies, computer education,
arts and gymnastics into the public school curriculum.
Reference 5.2
The Philippine Business for Social Progress (PBSP) is a membership organization of
businesses that support community development issues. Businesses set aside at least one
percent of their pre-tax net income for community development work. A portion of this
income is channeled through PBSP, and a portion retained by the company to run their own
programs. PBSP also offers assistance to member companies with their community
development programs, operates programs in selected regions in the Philippines and
participates in broader policy debates in the Philippines on community development issues.
In South Africa, Alusaf Limited teamed with Richards Bay Coal Terminal, Richards Bay
Minerals and other companies involved with the Zululand Chamber of Business Foundation
to turn the construction camp for an aluminum smelter into the Zululand Chamber of
Business Foundation Community Park. The park drew contributions and support from large
and small businesses in the area and currently houses a multitude of community resources
and facilities. This network of area businesses aims to mobilize businesses and community
leaders to respond to the area’s development needs and to be a hub for regional
development, education and community empowerment.
Reference 5.3
The Rossing Foundation in Namibia has run numerous projects with funding from donors.
The Foundation has developed a reputation as an effective development institution in
Namibia, and has formed partnerships with USAID, UNDP, the EU, DFID, SIDA and others.
Source: Symergos
The Rio Tinto Foundation in Indonesia has developed an integrated pest management
program in conjunction with the FAO and Mulawarman University in East Kalimantan.
The Foundation also signed a five-year MOU to implement a tuberculosis control program
in conjunction with the WHO, the Government of Indonesia and a national NGO, the
Indonesian Association Against Tuberculosis.
Reference 5.4
Some examples of company-government partnerships include:
• A mining company in Latin America complemented its community development
program by working with the national government’s social fund to identify, structure
and implement projects.
• A power company in Latin America drew on a government housing program to draw in
over $25 dollars for each dollar invested by the company and community. The
company was able to both expand the reach of the government program and draw
government resources into the community.
• The Inter-American Foundation set up several small infrastructure funds with
companies operating in Latin America. A board including members of local
government and representatives from the company, Foundation and NGOs managed
the funds.
• A mining company in the Philippines developed a strategy to hand over its community
development programs to the local government. The strategy involved training local
staff for the community development program and training and capacity building for
local government members.
Reference 5.5
In Cajamarca, Peru, the mayor started a Local Agenda 21 process to develop a sustainable
development plan for the municipality. Local Agenda 21 is a framework to promote local
sustainable development that emerged out of the Rio Summit in 1992. In Cajamarca, the
process was managed by a ‘table of coordination’ made up of representatives from the local
government, government ministries, local businesses and NGOs. The plan identified priority
needs for the province, existing resources and a plan to channel resources and develop
industries to promote sustainable development in the province. The Local Agenda 21
process and the plan for sustainable development in the province provide an opportunity
for companies operating in the province to channel some resources toward a well-defined
program of sustainable development in the municipality. Source: First Steps
The Spier Development Trust is working with national, provincial and local governments
as well as farmers and community groups to coordinate the development of the Spier Estate
near Capetown, South Africa as a resort and tourist destination. The estate and local
government have assumed joint responsibility for managing the stakeholder consultation
process. All parties have agreed to coordinate their efforts to use the estate to generate a
tourist industry that would create local employment and promote regional development.
The company is working to train local residents to take on senior positions in the estate and
to develop markets for local crafts and produce.
Source: Spier Development Framework
In partnering with governments, however, companies may also need to consider broader
policy issues such as assessing and building government capacity, working with
governments that are corrupt or hostile to community development, or promoting an
equitable revenue distribution and management plan.
Reference 5.6
Developing local capacity for revenue management
One key concern in forming partnerships with local government could be the lack of local
government capacity to effectively and transparently manage revenue generated by a project.
British Petroleum is grappling with this issue with its oil facilities in Casanare, Colombia.
CONCLUSIONS
Though maintaining partnerships can be difficult, the rewards in terms of combined
resources and talents, improved community development programs and enhanced
sustainability can be immense. Though the issues companies face when forming
partnerships could vary by country or institutions, a few common themes emerge.
• Credibility – Companies should be careful to work with institutions that are perceived
to be credible, accountable and transparent. This is crucial for building trust.
• Commitment – Companies must work to build internal commitment and should
ensure there is commitment on the part of partner organizations. When working
in partnership with government, companies should work to build or maintain
the commitment of government agencies and departments to community
development in the area.
• Flexibility – All partners must maintain flexibility to address issues arising out of their
different interests, orientations and goals.
OPTIONS FOR
PROGRAM STRUCTURE
Program structure is important in setting the tone, goals and values for a community
development program. Structure may determine success or failure. This section discusses a
range of considerations for structuring a community development program. In practice, as
corporations develop their individual programs over time, different approaches will grow
out of different industries, countries and business objectives.
CHOOSING BETWEEN A COMPANY-MANAGED OR INDEPENDENT PROGRAM
The first choice a company has to make is whether it wants the program to be part of the
company’s management structure or to be managed by a separate NGO, foundation or
trust. There are advantages and disadvantages to each approach.
Some reasons why companies set up independent organizations include:
• tax laws sometimes make it beneficial to set up an independent organization
• an independent management structure could allow the community development
program to have more community control than would be feasible for a
company-managed program
• a separate institution can help the company separate legal liability for the actions
of the community development program from those of the company, and
• an independent organization can outlive the company, adding to program sustainability.
Reasons to keep community development activities within the management of a
company include:
• the danger that communication between a separate foundation and the company may
be inadequate and may confuse outsiders, and
• the ease of forming community development partnerships across business units.
These issues are explored in greater detail in three in-depth case studies beginning on page 47.
Reference 6.1
In Shell’s Camisea project located in Peru, the company managed its community
development and community relations programs through its Health Safety and Environment
(HSE) department. HSE had eight Community Liaison Officers (CLOs) who worked to
consult with community members, strengthen local institutions such as indigenous peoples’
organizations and implement, in conjunction with community members, community
development programs. The CLOs also worked on the company’s participatory
Environmental Impact Assessment (EIA). Source: May
A community development program located within a company can achieve the best results
when it has strong support from the company’s CEO or senior management. This
commitment from senior management serves to sensitize all staff to community
development issues.
Company-managed programs, however, still need to incorporate community participation
and consultation. One possibility is to create an advisory body that includes community
members and other stakeholders. The section on ‘Incorporating Stakeholders’ in Chapter 7
offers more suggestions on building participatory, company-managed programs.
BOARDS OF DIRECTORS
The board of directors is extremely important in shaping how well a foundation or non-
profit organization will work. There is some agreement on proper board governance among
the various accrediting organizations. Key standards include:
• the board should have an independent, voluntary membership
• the board should have at least five voting members
• the board should have regular face-to-face meetings with an attendance policy for
board members
• board members should not receive remuneration for service, but can be reimbursed
for expenses
• no more than one paid staff member should serve on the board, usually the
executive director of the program, and
• the bylaws should include guidelines to avoid conflict of interest involving the
board or staff.
Choosing membership of the board is also an important consideration. A balance of
members should be chosen to meet various needs. All board members, including company
representatives, should have a demonstrated interest in promoting community development.
STAFFING
How a program is staffed is also critical to the success of a community development
program. Two important concerns in building a staff are capability and continuity.
• Capability – Staff should have integrity, honesty, and experience with community
development, knowledge of local issues, a commitment to participation and an
ability to interact with various groups in the community. Gender balance on the staff is
also important.
• Continuity – Trust is important in creating effective community development
programs. One means of building trust is by generating rapport and trust between
senior management, community development program staff and community members.
Companies need to have staff who will stay with a program and continuously work
with community members over extended time periods. This continuity is necessary
to establish and maintain trust.
Reference 6.2
The Rio Tinto Foundation in Indonesia expended a great deal of effort in choosing its staff.
In the selection process, they chose promising people from within the communities where
they operate. They put all potential staff through a training program in community
development, and through a field test. They selected staff members who they observed to be
the best at interacting with community members in a manner that was consistent with their
mission of participatory, community-based development.
FINANCIAL DISCLOSURE
Financial disclosure is important to maintain the credibility and transparency of a
community development program. Detailed, independently audited accounts of revenues
and expenditures enable community members and other interested parties to monitor the
program’s finances. Full financial disclosure and a commitment to transparency are
particularly effective in assuring stakeholders that the program is free from corruption.
Annual Reporting: An annual report should be available on request and should include:
a. an explicit narrative description of the organization’s major activities, presented in the
same categories and covering the same fiscal period as the audited financial statements
b. a list of board members, and
c. audited financial statements or, at a minimum, a comprehensive financial summary
that 1) identifies all revenues in significant categories, 2) reports expenses in the same
program, management/general, and fund-raising categories as in the audited financial
statements, and 3) reports ending net assets. (When the annual report does not include
the full financial statements, it should indicate that they are available on request.)
Budget: The organization should prepare a detailed annual budget consistent with the major
classifications in the audited financial statements, and approved by the board.
Reference 6.4
At the Philippine Investment Management Consultants (Phinma), community development
is carried out by a Community Relations (Comrel) unit at each plant under the technical
assistance of a Comrel Group Office at company headquarters. The company monitors
community development performance as part of its overall planning and monitoring
processes for the firm. Monitoring includes weekly plant level staff meetings, monthly
meetings at headquarters, quarterly consultations among Comrel Officers and a semi-annual
budget conference. At the budget conference, Comrel Officers report their units’
performance against set targets just as would any other line manager. The incorporation of
community participation as an organizing principle for the Comrel programs helps insure
that community input is incorporated into the corporate monitoring processes.
CONCLUSIONS
Program structure has profound impacts on the ultimate purpose and success of a community
development program. No program structure, however, can guarantee a program’s success.
How well a program works depends to a large extent on who is on the program’s staff,
how committed company staff and management are to the program’s objectives, who sits
on the board of directors, the cooperation and capability of partner organizations and a
host of other factors. Companies should consider the strengths and weaknesses of different
program structures, and employ the one best suited to the community’s needs.
Reference 7.1
The Palabora Foundation, started by the Palabora Mining Company in South Africa,
developed a mission statement that stresses community partnership.
In all its work, the Foundation takes a long-term view of community development and
strives, in partnership with communities, to encourage the growth of the following:
• a significant pool of technically skilled, educated and literate people
• an efficient community management structure
• community pride and loyalty
• leaders who epitomize these qualities, who are able to lead and manage wisely and
are committed to the welfare of their people.
CONCLUSIONS
The specific suggestions above can help a company move toward participatory,
sustainable community development programs. It is extremely important, however, for
companies to incorporate concern for participation and sustainability into all of the
decision-making related to community development. Both are key concerns throughout
the process of engaging in community development activities and are best addressed if the
company and the community development program are dedicated to the ideals of
participation and sustainability.
DEVELOPMENT FROM
LESSONS IN COMMUNITY
CASE STUDIES: LESSONS FROM EXPERIENCE IN COMMUNITY DEVELOPMENT FROM IFC CLIENTS
INTRODUCTION
New Delhi
Jaipur Agra
Allahabad Varanasi
Ahmadabad
Calcutta
Surat Nagpur
Bombay Pune
INDIA
Madras
Cochin
CASE STUDY | 51
TATA IRON AND STEEL COMPANY (TISCO): CREATING A
COMPANY-SPONSORED NGO FOR COMMUNITY DEVELOPMENT
Tata Iron and Steel Company (TISCO) - Tata Iron and Steel Company (TISCO)1 was
established in 1907. It was the first of the Tata Group of companies and the first steel
company established by an Indian national. TISCO is headquartered in Jamshedpur in
Bihar State. The company also has mines, quarries and plants in the state of Orissa. The
International Finance Corporation (IFC) first invested in TISCO in 1980. IFC’s current
investment in TISCO consists of both debt and equity financing. Between 1997-98 (FY98)
TISCO produced 3.0 million tons of steel.
Defining and Investing in the Community
“There is little doubt that the technical resources and managerial talents of organized
industry have a function in the society and an obligation to the community much wider
than the mere discharge of their primary business function. The aim of industry should be
to discharge its overall social responsibilities to the community and the society at large
where the industry is located.”
“I do believe that we in The Group have held a view and hold a sense of purpose that our
companies are not in existence just to run our business and to make profit – and that we
are responsible and good corporate citizens over and above our normal operations. By that,
I mean, that we play a part in the community and we shoulder community responsibility as
part of social responsibility of our nation. And, those responsibilities are not to be confused
with employee welfare, but they go beyond our own employees and in fact concentrate on
the contribution to the community and to the nation.”
TISCO or “Tata Steel”, as the company is more commonly known, has a long tradition
of investing in the community. This tradition began with J. N. Tata (1839-1904), and has
been carried on by subsequent generations. The notion of “community” as defined by
the Tata Group has evolved as expressed in their vision and mission statements. J.N.
Tata’s vision was to develop a model city with open spaces and parks for recreation for
Tata’s workers, while building India’s technological capacity for heavy industry. While
maintaining its focus on the local communities where its operations are located, over
time the company has also increasingly invested in the economic and social development
of the larger society.
J.N. Tata was motivated by the desire to “create wealth for the nation” and make India
independent of British economic domination. He founded Tata Steel and a technical
research and training institute to properly train future employees of Tata Steel. Indeed,
TISCO could not have flourished without a major investment in broad-based technical
training of workers from throughout the country.
The firm’s primary community has generally been seen as the inhabitants of Jamshedpur
and its adjacent rural communities.2 Jamshedpur is the quintessential “company town”
born from the shanty town that grew up around the steel plant in the village of Sakchi. The
population of Jamshedpur was made up of the rather modest local population and the vast
influxes of migrant labor from regions as far north as Rajastan. The wide-ranging nature of
TISCO’s activities associated with the extraction of coal, limestone and iron for steel
production, brought the company into contact with communities far beyond Jamshedpur.
As a result, TISCO invests both in the tribal communities near its extraction activities and in
the communities of migrants and residents of Jamshedpur and its other industrial sites.
Toward Sustainable Community Development through a Local NGO - TISCO began
investing in local communities soon after the Jamshedpur plant started production in 1907.
1 The company is registered as Tata Iron and Steel Company (TISCO). Tata Steel is the company’s logo. Tata Sons is the
holding company of Tata Group.
2 See CD Guide Defining Community (Chapter 2).
7 Memorandum of Association of TSRDS, in which the steel company is a principal promoter of TSRDS and agrees not
only to assist it with financial aid but also to spare executives from the company in order to professionalize the
operations of TSRDS. As such, the company pays these professionals while they work for TSRDS.
8 Personnel drawn from the company are trained development professionals and are social scientists, chartered
accountants, civil engineers and physicians who have adapted to the working conditions in rural areas. They are seen as
planners and team leaders. They are an interdisciplinary group of specialists in agriculture, forestry and paramedics
(health care paraprofessional/health auxiliaries), engineering, materials management, etc. Building their capacity through
intensive training and exposure is stressed and each staff member is looked upon as a repository of information and
experience. There are 45 staff members (thirty-eight officers and nine supervisors) on the TISCO payroll and 193 staff on
the TSRDS payroll.
9 TSRDS. 1998. Tata Steel Rural Development Society brochure. Jamshedpur: TSRDS.
10 TSRDS reports that when it first entered, “The villagers were suspicious, indebted and unwilling to respond.
The local maharajas had exploited them and pushed them into a withdrawal. Regularity of meetings and allowing the
villagers to express themselves…. (plus) …perhaps the neutral position of the Tribal and Harijan Welfare Cell helped
us to break barriers with individuals becoming responsive. It was then that we began forging a program based on
mutual experiences.” Action begins with a token contribution from the people. An amount of Rupees one hundred
is donated by each of about hundred households. This “fund” was deposited in a bank, matched by some funds and
expertise from engineers, doctors and teachers who volunteered. In addition, we mobilized professionals and social
workers for the locality.
11 The role of the Tribal and Harijan Welfare Cell is to help strengthen existing community-based organizations in such a
way that the community not only feels included but can “sustain itself thereafter”. TSRDS first selects a volunteer
authorized by the traditional tribal leadership “to make a small beginning.” TSRDS has therefore graduated from using a
“development agency” approach to one that is a “catalyst” for facilitating change. In these rural areas villagers are the
planners, implementers and monitors of their own development process.
12 See CD Guide, “Partnerships for Local Development”, Chapter 5.
Communities use their own resources to supplement the financial assistance they get from
TSRDS for programs and projects in agriculture, infrastructure, health, education, sports
and youth development, women’s development and income-generation. To supplement the
incomes of the poor, TSRDS undertakes microenterprise development through a tri-lateral
partnership between itself; community-based organizations (CBOs) made up of local
residents and CALO (Committee for Assessment of Local Organizations) who screens CBOs
before TSRDS partners with them.13 TSRDS also works in partnership with local
government. The Society trains and then partners with local microentrepreneurs who
become suppliers to the company. In some cases, these microenterprises have grown to
become important commercial entities.
One of the major contributions of TSRDS is its role in social capital building by engaging
local, national and international public and private partners for the development of local
rural communities in India.14 These partners are:
• State and Municipal Government Agencies have historically called upon TISCO to
assist them whenever the country faced an emergency caused by a natural disaster or
political crisis. The 1988 Bihar earthquake is one example. Extending its relief beyond
13 In order to select suitable screening agents, See CD Guide “Four Qualities to Look For in Partner Organizations”, p. 37
in Partnerships for Local Development (Chap. 5)
14 See CD Guide “Building Sustainability Into Project and Program Structure” in Participation and Sustainability, Chapter 7,
and Partnerships for Local Development (Chap. 5)
Mailing Address:
Tata Steel Rural Development Society, E Road, Jamshedpur 831 001, Bihar State, India
Phone (0657) 425-999, (067) 435-609; Fax (067) 432-174
E-mail tsrds@jsr.tatatsteel.com
Manila
PHILIPPINES
Davao
CASE STUDY | 59
PHINMA GROUP:
COMMUNITY DEVELOPMENT AS A MANAGEMENT FUNCTION
PHINMA - Philippine Investment Management Consultants (PHINMA) began as a small
consulting company operating out of a single room in Manila in November 1956. It is
unique in that it was one of the first companies in The Philippines to be owned and
operated principally by Philippine nationals. IFC has two investments with the PHINMA
Group: IFC invested in Bacnotan Cement in 1993 and in United Pulp and Paper Company
(UPPC) in 1999. In 1957, PHINMA established Bacnotan Cement, now Union Cement, as
its first manufacturing company. The firm’s growth over the years has reflected its strong
performance. Currently, the subsidiaries of Bacnotan Consolidated Industries collectively
produce over 8 million metric tons of cement annually. The PHINMA Group also occupies
the dominant position in paper manufacturing and packaging, construction materials, oil
exploration, trading and financial services in The Philippines. It now oversees 12 managed
and affiliated companies.
Defining and Investing in the Community - The company’s mission statement says,
“PHINMA regards the community as one of its stakeholders or publics, together with
government, stockholders, suppliers, customers and the like.” PHINMA also asserts that
“The original board…wanted to do something for the national good”.1 This corporate vision
of community development as core business is rooted in the experience of PHINMA’s
Filipino founders. They started out as small businessmen who found it difficult for Filipinos
to compete in a local market dominated by multi-national firms. Part of the problem was
that the local market actually preferred foreign companies. The company recognized early
on that its own core business was inextricably tied to national development, to which it
was also committed. PHINMA defines its local community as those people living in
regions where its manufacturing plants extract natural resources. Its manufacturing facilities
are located in communities as far north as Bacnotan in La Union Province to the islands of
Davao and Mindanao in the South. PHINMA places as much importance on the needs of
the community as it does on the needs of other stakeholders.
Toward Sustainable Community Development through A Corporate Management
Organization - PHINMA was established as “the pioneer in project development and
corporate management in the Philippines.” PHINMA views its role as that of a
management pioneer and corporate citizen dedicated to national development. Since the
community is one of PHINMA’s stakeholders or “publics” in its core business, PHINMA
sees “public relations” as “community relations”. PHINMA defines community relations, in
turn, as community development. The company defines its role in community development
as one that helps “its…neighbors help themselves” and states that it wants to achieve this
objective by helping them “acquire skills, organize themselves, improve their quality of
life, and develop strong community- and society-oriented values”.
Importantly, the company says that it implements community relations or “Comrel” as a
management function. Tying community development directly to the management and
financing of its core business is the only way of making community development
sustainable, in PHINMA’s eyes. Its corporate management expertise has also driven the
company’s efforts to continually improve Comrel management as core business. PHINMA
takes the time needed to gain effective community participation through community
organizing using “applicable corporate management techniques”. In doing so, the
company feels that it produces community development projects more efficiently than
NGOs who lack financial, commercial and management experience. The evolution of
Comrel is therefore the major focus of this case study.
Comrel - Comrel has helped develop income-generating projects for local communities
such as building fish cages, concrete hollow blocks, rice threshers and hand tractors;
raising poultry, hogs and goats; and making industrial rags and printing cement bags.
Comrel has also invested in water, sanitation and power infrastructure, medical missions,
day care centers, secondary schools, adult education, and sports. Comrel also measures
1 See CD Guide “Including Communities in Company Mission Statements” Chapter 1
Mailing Address:
Mr. Roger Salazar, Jr., Public Relations (general information)
PHINMA Building,
166 Salcedo Street, Legaspi Village
1200 Makati City, P.O. Box 2368 MCPO
Phone: (632) 810-9526 Fax: (632)-817-9807
E-mail: rgs@phinma.com.ph
ESCONDIDA:
Creating Foundations
for Sustainable Mining
CHILE
Santiago
CASE STUDY | 65
ESCONDIDA:
CREATING FOUNDATIONS FOR SUSTAINABLE MINING
Minera Escondida Ltda (Escondida) - The Escondida Mining Company (Escondida) in Chile
is one of the world’s largest copper producers and one of the most valuable of IFC’s equity
holdings. IFC first invested in the mining company in 1987 and recently made an
additional investment to expand mining operations. Escondida produced 21.6 percent of
Chile’s copper in 1999 (958,518 metric tons).
Defining and Investing in the Community - Escondida recognizes that mining carries risks
borne by both communities and companies, but that historically communities have carried
a disproportionate share of these risks, particularly after mine closure. Therefore, the
company approaches community development by focusing on how to mitigate the socio-
economic consequences associated with mine closure. It defines its area of influence as
those regions that benefit economically while the mine is in operation, and targets local
residents “with limited resources.” The company benefits the inhabitants of these regions by
providing employment in mining and in a large number of mining-related activities. The
company also procures goods and services locally and nationally. These goods and services
generate indirect employment and increase local capacity, plus they generate tax revenues
for the government.
Escondida is different from those mining projects that must focus, first and foremost, on
directly impacted neighboring communities. The mine is located in a semi-arid region, with
no permanent settlement within a radius of 120 kilometers. The staff lives mainly in and
around the city of Antofagasta, 160 kilometers away. As a result, Escondida’s “community” is
actually quite distant from its business activities. Though the region has relatively less
poverty and generally better employment opportunities than Chile’s other regions, it exhibits
a strong dependence on mining. The company tries to complement services the government
cannot finance in the region, particularly those in education and health.
Nationally, the company constitutes 2.1 percent of Chile’s GDP and has paid accumulated
taxes of about US$1.3 billion. Hence, Escondida’s area of influence is national, yet from its
mine closure perspective the local community includes Antofagasta and other communities
in the region. Indeed, the company links core business to community development by
establishing local preferences in hiring and procurement. It employs about 10 percent of
the population of this region, when direct and indirect employment are considered.
Toward Sustainable Community Development through Foundations - Originally Escondida
began its community development activities at the end of 1989 under the direction of the
Natural Resources and Environment Department created that year. The manager of this
department began working with the community to support events and activities the
community identified as needs. This particular manager helped guide the Natural
Resources and Environment Department through its evolution into the Corporate Affairs
unit in 1995. When Escondida decided to form the Fundacion Minera Escondida (FME) in
1996, the head of Corporate Affairs became the head of the Foundation.
The Foundation’s vision is best expressed by its motto: “sustainable mining through health,
education and quality of life.” Its mine closure concerns led Escondida to begin formulating
a model for sustainable mining, defined as operations that contribute to human capital in
ways that will reap benefits long after mining operations have ceased. Escondida wanted to
invest in such a way that the community could realize gains in terms of its own expectations
and aspirations and find specific answers concerning the effects of mine closure.
The company decided that achievement of its objectives required the establishment of a
specialized organization to focus solely on community development. This would be an
organization: (a) the community could learn to trust over time as it separated itself from the
company and engaged in indirect and non-paternalistic philanthropy; (b) the company
could have a degree of control over based upon its ability to nominate six of the eleven
board members; and (c) that could become sustainable and continue operations after mine
closure. With these objectives in mind, the company set up FME in 1996. To complement
FME PROGRAMS
FME-run programs center on three focus areas:
Education, Health and Social Development. Below
are details on the specific programs developed by
the Foundation under these three focus areas.
Education - FME sponsors programs in mathematics
and entrepreneurial/occupational training at several
schools in Antofagasta. FME has also been
instrumental in getting several regional schools from
smaller communities online by supplying hardware
and software sufficient to link to the Ministry of
Education’s intranet. In a joint venture with the
Canadian and Chilean governments and local
universities, FME is supporting the construction and
operation of a technical training center in Copiapó
focused on low income residents.
Health - FME has chosen to target its health funding
at cancer research, treatment and prevention, and
emergency dental care. To achieve its objectives, FME
underwrites research projects, subsidizes the cost of
medications and equips both cancer and dental care
facilities. FME has extended its coverage beyond the
region and also has obtained cooperation agreements
with municipalities in Northern Chile and the Chilean
Association of Municipalities.
Community and Social Development - In this area,
FME has devoted much of its resources to various
programs designed to benefit the Atacamenians, a
regional indigenous group. For example, it trains 4
tour guides, gives college scholarships, has published
a textbook on Atacamenian history and administers a
development fund for the Atacamenian community. In
order to develop and implement these programs, FME
has established a close relationship with indigenous
associations, the Municipality of San Pedro de
CTE PROGRAMS
CTE offers multi-year apprenticeships in areas of key industrial need, including the
mechanical, electrical and millwright trades. This program is being offered under a
technology transfer agreement with the British Columbia Institute of Technology (BCIT).
CTE has also teamed with Chilean universities to offer training programs such as one on
instrumentation. Through the apprenticeship program CTE trains hundreds of workers from
the maintenance departments of the Escondida mine and mill. CTE offers its training
facilities and programs to other mining companies in the region on a cost-sharing basis.
Mailing Address:
Fundaçión Minera Escondida
Coquimbo N° 888, Piso 3, Oficina 302, Antofagasta, CHILE.
Phone: 56-55-283651 Fax: 56-55-283619
E-mail: funmines@entelchile.net
IFC. Doing Better Business Through Effective Public Consultation and Disclosure: A Good Practice
Manual. Washington: IFC Environment Division, 1998.
Available at http://www.ifc.org/ifc/enviro/Manual/manual.html
IFC. Promoting Environmentally and Socially Responsible Private Sector Investment: An Introduction.
Washington: IFC Environment Division, 1999. Available at: www.ifc.org/enviro
Peter May et al., Corporate Roles and Rewards in Promoting Sustainable Development: Lessons
Learned from Camisea, UC Berkeley Energy and Resource Group, 1998.
Sixto Mendez, Jennifer Parnell and Robert Wasserstrom, ‘Seeking Common Ground: Petroleum and
Indigenous Peoples in Ecuador’s Amazon,’ Environment, June 1998.
Tata Steel, The Untold Story: Resettlement & Rehabilitation at Gopalpur Displacement &
Rehabilitation Workshop, Lal Bahadur Shastri Academy of Administration, Mussorie, India, June 1998.
Glen Williams and Sunanda Ray, Work Against Aids: Workplace-based AIDS Initiatives in Zimbabwe,
London: ActionAid, 1993.
Prince of Wales Business Leaders Forum. Business as Partners in Development: Creating Wealth for
Countries, Companies and Communities. PWBLF: London, 1996.
Matthew Arnold and Robert Day, The Next Bottom Line: Making Sustainable Development Tangible.
WRI: Washington, 1998.
David Logan, Delwin Roy and Laurie Regelbrugge, Global Corporate Citizenship – Rationale and
Strategies. Hitachi Foundation, 1997.
Kathryn McPhail and Aidan Davy, Integrating Social Concerns into Private Sector Decisionmaking: A
review of Corporate Practices in the Mining, Oil and Gas Sectors, World Bank: Washington, 1998.
Web Resources:
IFC. Doing Better Business Through Effective Public Consultation and Disclosure: A Good Practice
Manual. Washington: IFC Environment Division, 1998. Available at
http://www.ifc.org/ifc/enviro/Manual/manual.html
World Bank. The World Bank Participation Sourcebook. World Bank: Washington DC, 1996.
Terry Grandstaff and Donald Messerschmidt, A Manager’s Guide to the Use of Rapid Rural Appraisal.
Farmer Centered Agricultural Resource Management Programme: Bangkok, 1995.
Sasakawa Peace Foundation, Corporate Citizenship in Thailand and the Philippines, Sasakawa: Tokyo,
1991. – Includes case study of CADP and other case studies of corporate community development
from Thailand and the Philippines.
Aidan Davy, Kathryn McPhail and Fabian Sandoval, BPXC’s Operations in Casanare, Colombia: An
Evaluation of how Social Concerns have been Factored into Development Decisionmaking,
Washington DC: World Bank, Social Development Paper 31, 1998.
Frank Vanclay and Daniel Bronstein, editors. Environment and Social Impact Assessment. Wiley:
New York, 1995.
Kurt Finsterbusch, Jasper Ingersoll and Lynn Llewellyn, Methods for Social Analysis in Developing
Countries, Westview: Boulder, 1990.
Web Resources:
Reading Room for the Participation Group, Institute of Development Studies, University of Sussex,
http://www.ids.susx.ac.uk/ids/particip/readrm.html –
Nana/ Cominco ltd. Shared values, Common Goals, Exceptional Results: The Red Dog Mine Story
available at http://www.cominco.com/Ops/Reddog/rd-br.html
John Edwards, ‘La inversión social, una decisión rentable,’ in Olga Lucía Toro and Germán Rey,
Empresa Privada y Responsabilidad Social. Centro Colombiano de Filantropía: Bogota, 1996.
Pamela Sloan and Roger Hill, Corporate Aboriginal Relations: Best Practice Case Studies. Hill Sloan
Associates: Toronto, 1995.
Partnerships:
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Intersectoral Partnering. USAID: Washington DC, 1998.
CorCom. Making Contact: Negotiating a Partnership between Business and Nonprofit Organization.
Report of a Seminar held on April 28, 1998. CorCom: Washington DC, 1998.
CorCom. Lessons Learned from Partnerships between Businesses and Nonprofit Organizations. Report
of a Seminar held on May 29, 1998. Corcom: Washington DC, 1998. USAID.
Synergos Institute and PWBLF, Partnerships for African Development: Business and Communities
Working Together in Southern Africa. Synergos: New York, 1995.
Graham Hancock and Tim Omundsen, ‘The Development Forum Process in Large-Scale Mining
Projects in Papua New Guinea, in Mining and the Community for Asian Pacific Nations: Conference
Proceedings from Madang, Papua New Guinea, Jlyy 26-29 1998, World Bank: Washington DC, 1998.
Prince of Wales Business Leaders Forum, Managing Partnerships: Tools for Mobilizing Business as
Partners in Development. PWBLF: London.
Web Resources:
Program Structure:
International Center for Not-for-Profit Law (www.icnl.org) – Includes publications, laws and reports
from various countries and contact information for the organization. The organization works primarily
on creating legal enabling environments for non-profit organizations.
Myra Alperson, Building the Corporate Community Economic Development Team. Conference Board:
New York, 1998.
Matthew Arnold and Robert Day, The Next Bottom Line: Making Sustainable Development Tangible.
WRI: Washington, 1998.
Aidan Davy and Kathryn McPhail, Chevron Niugini’s Kutubu Operation, PNG: An Evoluation
of how Social Concerns have been Factored into Development Decisionmaking. World Bank:
Washington, 1998.
Aidan Davy, Kathryn McPhail and Fabian Sandoval, BPXC’s Operations in Casanare, Colombia: An
Evaluation of how Social Concerns have been Factored into Development Decisionmaking, World
Bank: Washington DC, Social Development Paper 31, 1998.
Aidan Davy, Auristele Perez and Manish Bapna, Placer Dome’s Las Christinas Project, Venezuela:
Factoring Social, Cultural and Environmental Concerns into Development Decisionmaking. World
Bank: Washington DC, 1999.
David Logan, Delwin Roy and Laurie Regelbrugge, Global Corporate Citizenship – Rationale and
Strategies. Hitachi Foundation, 1997.
Peter May et al., Corporate Roles and Rewards in Promoting Sustainable Development: Lessons
Learned from Camisea, UC Berkeley Energy and Resource Group, 1998.
Sixto Mendez, Jennifer Parnell and Robert Wasserstrom, ‘Seeking Common Ground: Petroleum and
Indigenous Peoples in Ecuador’s Amazon,’ Environment, June 1998.
Prince of Wales Business Leaders Forum. Building Competitiveness and Communities: How World
Class Companies are Creating Shareholder Value and Societal Value. PWBLF: London, 1998.
Prince of Wales Business Leaders Forum. Business as Partners in Development: Creating Wealth for
Countries, Companies and Communities. PWBLF: London, 1996.
Sasakawa Peace Foundation, Corporate Citizenship in Thailand and the Philippines, Sasakawa: Tokyo,
1991. – Includes case study of CADP and other case studies of corporate community development
from Thailand and the Philippines.
Pamela Sloan and Roger Hill, Corporate Aboriginal Relations: Best Practice Case Studies. Hill Sloan
Associates: Toronto, 1995.
Synergos Institute and PWBLF, Partnerships for African Development: Business and Communities
Working Together in Southern Africa. Synergos: New York, 1995.
Tata Steel, The Untold Story: Resettlement & Rehabilitation at Gopalpur Displacement &
Rehabilitation Workship, Lal Bahadur Shastri Academy of Administration, Mussorie, India, June 1998.
Olga Lucía Toro and Germán Rey, Empresa Privada y Responsabilidad Social. Centro Colombiano de
Filantropía: Bogota, 1996.
Glen Williams and Sunanda Ray, Work Against Aids: Workplace-based AIDS initiatives in Zimbabwe
London: ActionAid, 1993.
Web Resources:
Civicus, www.civicus.org – NGO federation with links to Business Partnerships for Development pro-
gram at the World Bank
World Resources Institute (WRI), Management Institute for Environment and Business,
http://www.wri.org/meb
Page 4 Page 31
Bolivia/The World Bank Belize/Susan Wood
Page 5 Page 32
Morocco/Susan Wood Guatemala/The World Bank
The International Finance Corporation (IFC), the World Bank Group's private sector investment arm, seeks to further
economic growth by promoting sustainable private sector development in developing member countries, thereby reducing
poverty and improving people's lives. IFC is a legally and financially independent institution and is collectively owned by its
174 member countries. Since its establishment in 1956, IFC has committed more than $29 billion of its own funds and has
arranged $19.2 billion in syndications and underwriting for 2,446 companies in 136 developing countries. By working closely
with business and entreprenuers — both large and small — IFC adds value to the development process by acting as an
adviser to clients and governments and by creating standards of behavior in corporate environmental and social
responsibility for its own investments — and for the private sector generally. IFC strives to be more transparent and © 2000 The International Finance Corporation (IFC)
accountable and seeks input from a broad set ot stakeholders, especially project affected communities. 2121 Pennsylvania Ave, NW Washington, DC, 20433 USA
IFC has in-house environmental and social project appraisal capacity and also provides advice and training to financial All rights reserved
institutions on these standards. IFC's environmental, social and disclosure policies, procedures and guidelines have been
This Guide has been prepared by the staff of the International Finance Corporation (IFC). The judgments
developed after extensive peer review and draw on best practice and experience across a wide range of industries and expressed do not necessarily reflect the views of IFC’s Board of Directors or the governments they represent.
disciplines. Using both its own funds and concessional funding from sources such as the GEF, IFC also invests actively
in projects with specific environmental goals, supporting projects ranging from renewable energy to clean water supply. ISBN 0-8213-4891-4
For more information on IFC and its activities in promoting sustainable private sector investment, go to: www.ifc.org/enviro.
Environment Division
Promoting Environmentally and Socially Responsible Private Sector Investment